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6. Suppose you invest $10,000 in a 1 year equity linked CD. At maturity, the CD is guar- anteed to pay the invested amount, plus
6. Suppose you invest $10,000 in a 1 year equity linked CD. At maturity, the CD is guar- anteed to pay the invested amount, plus 50% of the percentage gain (if any) during the year on the stock index to which it is linked. At the time you invest, the stock index is prices at $1,500. Your payoff in one year is $10,000 (1 + c C(Si, K, 1))), where C(S K, and c is a constant. Determine c and K. What would the value of the stock index have to be at the 1, K,1) is a one year call option on the index with strike price end of the year (at maturity of the CD) in order for the CD to pay you $12,000
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